Canadian car dealers staying put: PricewaterhouseCoopers/DesRosiers Automotive study



    TORONTO, Jan. 22 /CNW/ - While 52% of car dealers in Canada believe the
value of their dealership is decreasing, over three quarters are committed to
staying in the industry and are pleased with the products they sell, according
to the 2008 PwC Dealer Trendsetter Survey, an annual survey of new car dealers
in Canada conducted by PricewaterhouseCoopers (PwC) and DesRosiers Automotive
Consultants Inc.
    According to the survey of 250 dealers, 82% of dealers plan on staying in
the business for at least five more years, including 95% of Japanese car
dealers and 83% of the Detroit Three. In previous years, one in four dealers
wanted to exit out of the business. And while 90% of respondents believe it is
not a good time to sell their stores because of lack of available capital,
reduced goodwill valuations and lack of qualified buyers, 36% would like to
acquire additional dealerships should they be able to raise the necessary
capital.
    "Despite market issues facing the automotive sector, particularly the
Detroit Three, dealers are still planning to stay in the game and probably
longer than what they initially intended," says Terri McKinnon, PwC Automotive
Retail Leader. "2009 is forecasted to be a difficult year, but the results
indicate dealers are looking ahead and thinking long term. The question is
whether they have the right management team in place to weather the storm, as
surprisingly 35% of dealers believe they do not."
    To help manage through the downturn, the vast majority of dealers are
looking to increase revenues from fixed operations (66%) and finance and
insurance products (59%), while 56% of dealers are planning on tightening
controls over expenses, including reducing inventory. McKinnon adds, "This is
a significant change from the mentality of dealers in the past. Given the
current economic environment, they are realizing the business is not simply
about moving metal, but also focusing on other areas of the business to
generate profits and holistically serve their customers."
    Canadian dealers are also embracing the trend to multi-dealer formats of
ownership, and 70% of dealers believe that during the next five years the
business will be controlled by larger, multi-franchised dealers, which is
especially the case for major markets.
    But despite these strategies, only 56% of dealers have confidence in the
long-term plans of their original equipment manufacturers (OEMs) to
successfully see them through the next ten years. When it comes to management,
over one third of dealers (38%) are not confident in their succession plans.
    However, 75% of dealers are very pleased with the products they sell-a
significant improvement from previous survey results when close to only half
of respondents were satisfied with their products. "Although dealers are less
optimistic about the future of their franchise, the results show they are
still excited about the future product of the brand they represent," says
Dennis DesRosiers, President of DesRosiers Automotive Consultants Inc.
    The Dealer Trendsetter Survey also followed up on some key trends seen in
previous reports and introduced new topics of discussion. These include:

    Investment in facilities

    In the last 10 years there has been a significant amount of investment by
dealers to upgrade their facilities to comply with the OEMs' brand imaging
programs. Sixty percent of dealers indicate that there continues to be a
significant push by the OEMs to build new facilities or renovate their current
facilities and to invest in image programs. However, only 61% of respondents
cited an increase in return on sales on new facilities and only 50% for those
dealers who renovated. On average, dealers have spent $5.7 million on new
facilities within Ontario (versus $2.4 million in 2003), and BC dealers are
spending twice as much as other regions of the country. DesRosiers adds,
"Given the current economic environment it will be interesting to see if the
OEMs continue to put pressure on the dealers."
    Japanese dealers have close to doubled their spending compared to
domestic dealers, however 39% of Japanese dealers have not yet experienced an
increase in profits, and only 42% have seen positive movement in their
absorption ratio.

    Partnership with the factory

    While the majority of dealers are excited about the future product
direction of the brands they represent, only 49% believe that their brand's
field representatives offer great value. Even fewer (43%) believe that the OEM
is more of a valued and contributing partner in their business. The survey
also found that smaller dealers (those with sales under 250 new units) and
larger dealers (sales between 501-1,000 units) have better relationships with
their factories than mid-sized stores.
    For more information, please visit www.pwc.com/ca/auto or
www.desrosiers.ca.
    For more information on managing in a downturn, visit
www.pwc.com/ca/managinginadownturn.

    About PricewaterhouseCoopers LLP

    PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.

    About DesRosiers Automotive Consultants Inc.

    Founded in 1985, DesRosiers Automotive Consultants Inc.
(www.desrosiers.ca) is the only consulting and market research company in
Canada specializing in the automotive industry. We work with a wide range of
automotive industry clients and with those outside the industry wishing to
further their understanding of this complex and rapidly-changing sector of
Canada's economy.
    Our most popular services include market forecasting, feasibility
studies, competitive analyses and consumer market research for a diverse group
of organizations. A number of our clients also take advantage of our
management briefing and strategic planning services.





For further information:

For further information: Nina Godard, PricewaterhouseCoopers LLP, (416)
941-8383 ext. 13520, nina.godard@ca.pwc.com; Dennis DesRosiers, DesRosiers
Automotive Consultants Inc., (905) 881-0400, dennis@desrosiers.ca

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